Research Article
The Experimental Verification of Portfolio Management Theory Based on Normal Distribution and i.i.d. Test
@INPROCEEDINGS{10.4108/eai.18-11-2022.2327152, author={Xinyu Liu and Haozhe Zhou and Shuming Liu}, title={The Experimental Verification of Portfolio Management Theory Based on Normal Distribution and i.i.d. Test}, proceedings={Proceedings of the 4th International Conference on Economic Management and Model Engineering, ICEMME 2022, November 18-20, 2022, Nanjing, China}, publisher={EAI}, proceedings_a={ICEMME}, year={2023}, month={2}, keywords={portfolio theory data test diversification unsystematic risk}, doi={10.4108/eai.18-11-2022.2327152} }- Xinyu Liu
Haozhe Zhou
Shuming Liu
Year: 2023
The Experimental Verification of Portfolio Management Theory Based on Normal Distribution and i.i.d. Test
ICEMME
EAI
DOI: 10.4108/eai.18-11-2022.2327152
Abstract
American economist Markowitz put forward the portfolio theory for first time in 1952. Even though it has developed for decades，constant main idea is still diversification. Based on 9 risky assets and one typical risk-free asset, we assume all are subjeccted to normal distribution and i.i.d. after test and use random functions (while generating portfolios’ weights) by using R to construct numerous portfolios to check if we can truly reduce unsystematic risk while investing in different assets by diversification. The empirical results indicate that diversifying is an excellent way to effectively improve our investment efficiency and better our investment choices. This paper provides some more detailed to prove the accuracy of portfolio management theory.
